Plane Landing In Brussels-National Airport

STEENOKKERZEEL, BELGIUM - JULY 30: A Boeing 737-8FH from Corendon Airlines is landing in Brussels-Zaventem Airport (Photo by Thierry Monasse/Getty Images)

Grounded

Boeing at risk of being cut to junk status? The market did that a long time ago.

What, do credit rating agencies not read the news?

Luke Kawa

9/13/24 12:43PM

Boeing is on the verge of having its credit rating downgraded to junk by Moody’s amid a strike that’s crimping output.

Now, even if Moody’s cuts the company to junk, Boeing still retains investment grade ratings at S&P and Fitch, for now (though Fitch has also made some negative noises recently about the company’s financial position).

All these negative headlines aren’t doing anything good for the stock price, which has dropped to its lowest level since late 2022.

Losing an investment grade rating from the majority of credit agencies would make Boeing a “fallen angel” – and presumably the company would endure some forced selling from funds that can only hold investment grade debt (offset somewhat by some buying from funds that hold only junk bonds).

But it’s worth flagging that, for most of this year, the credit market had done a fine job treating Boeing like junk. And if anything, the company had been starting to move in the other direction, effectively starting to split the difference between the bottom tier of investment grade (BBB) and the top tier of junk (BB), at least by looking at its 30-year debt:

Caveat: when we’re talking about 30-year BB junk bonds, we aren’t exactly working with the largest sample.

The run up to the global financial crisis has shown us that the only companies that might be worse at internal quality control than Boeing are the rating agencies themselves. But I guess it’s also pretty wild a company that’s poised to make more than $20 billion in sales to the US government this year can still be considered so risky a business by some of the most serious bean counters around.

Toby Bochan

Market Wrap

Markets cheer surprise gift of cooler CPI amid renewed AI optimism to finish higher

The S&P 500, Nasdaq 100, and Russell 2000 surged on Thursday — perhaps we’ll have a Santa rally after all!

CAMARILLO, CA FEBRUARY 09: A cannabis farm worker de-leafs cann

Trump signs executive order expediting reclassification of marijuana as a less dangerous drug

Rescheduling would lift regulatory pressures that have been weighing on US cannabis operators’ margins. Shares of weed companies, many of which don’t sell cannabis in the US, tumbled an hour before the executive order was signed.

J. Edward Moreno6h

Max Knoblauch7h

Rivian climbs as it rolls out a “universal hands-free” update and scores an upgrade from Baird

Shares of EV maker Rivian are on pace for their 10th best day of 2025 on Thursday, following an upgrade from Baird to “buy” from “hold” and the rollout of its new hands-free driving update.

Baird raised its price target on Rivian nearly 79% to $25, writing that “2026 is the year of R2.”

Meanwhile, Rivian says its new hands-free feature will allow drivers to take their hands off the wheel across 3.5 million miles of US and Canadian roads.

Despite referring to it as “universal hands-free” driving, the EV maker says the feature will not stop or slow for traffic lights or stop signs, follow navigation systems, or make turns, and will function only on roads with visible lane lines.

Rivian revealed the update at its AI Day last week, when it also hinted at a robotaxi plan.

Rivian rolls out new 'Universal Hands-Free' driving feature | TechCrunch

Meanwhile, Rivian says its new hands-free feature will allow drivers to take their hands off the wheel across 3.5 million miles of US and Canadian roads.

Rivian revealed the update at its AI Day last week, when it also hinted at a robotaxi plan.

Matt Phillips8h

The stock market loves your rising electricity bill

Utilities with a footprint in the massive PJM Interconnection, the country’s largest power grid, were up Thursday after prices set in a key auction hit a record high of $333.44 per megawatt-day.

Such power providers, including Talen Energy, Constellation Energy, and Vistra, saw tidy gains shortly before midday.

“This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself,” Stu Bresler, set to become PJM’s chief operating officer next month, told Reuters.

As I’ve previously mused, political pushback from high power prices, partially created by the AI boom, could become a constraint on development of such sites. Democrats in the US Senate are now calling for hearings on the issue.

It’s fertile political soil. This morning’s US CPI report for November showed electricity prices up nearly 7% year over year, the highest since the tail end of the postpandemic inflation in April 2023.

Costs on Key US Grid Hit New Record, Testing Affordability

Luke Kawa9h

Micron’s earnings, soft inflation, and OpenAI valuation chatter revive speculative AI trade

The three biggest news events since markets closed yesterday are all helping spur a big bounce-back for the more speculative companies tied to AI:

Micron’s eye-popping Q2 guidance reaffirmed beyond a shadow of a doubt how hot AI demand continues to run in the near term.
While the data is undoubtedly messy, core CPI inflation decelerated by much more than anticipated in November. Lower rates are a clear positive for more marginal companies levered to the AI theme, whose stocks trade with a higher embedded risk of default and whose bonds have also been suggesting more credit risk as of late.
OpenAI reportedly getting its hands on more money (and commanding a higher valuation in the process) provides some semblance of valuation support for these firms and also a better fundamental foundation as well: more cash in CEO Sam Altman’s pockets means more cash he has to make good on commitments to OpenAI’s many suppliers.

Put together, the key news items since Wednesday’s close are producing massive gains for the likes of Bloom Energy, Cipher Mining, POET Technologies, CoreWeave, IREN, and Nebius.